Credit Suisse tempers growth plans in turbulent market

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ZURICH, June 28 (Reuters) – Credit Suisse (CSGN.S) may be “moderating” some of its key wealth management growth initiatives by focusing on risk recovery and technology boosting , the executives said in their first update to investors since a new strategy was set.

A series of losses and scandals have sent Credit Suisse’s share price plummeting since March 2021, prompting foreclosures and a strategic overhaul to rein in its investment bank and focus more on managing the wealth of the world’s wealthy. world. Read more

These plans were presented in November – before inflation, rising interest rates, commodity shocks and Russia’s war in Ukraine triggered financial market turmoil and pushed many investors to withdraw from borrowing and perceived risk.

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Under a largely new leadership team, Credit Suisse said it now plans to expand the savings it hopes to achieve through technology while maintaining plans to grow its business with wealthy and ultra-rich clients. -rich, albeit at a potentially slower pace.

“The long-term strategy does not change. We have set out a strategy to build a successful long-term wealth management business,” Francesco De Ferrari, head of Wealth Management, told investors and analysts during a presentation to investors. investors.

“Obviously the pace at which you see some of the initiatives being rolled out needs to be tempered given the market environment.”

Switzerland’s second-largest lender announced in November its ambition to redeploy some 3 billion Swiss francs ($3.14 billion) of capital to its wealth management division by 2024.

Chief executive Thomas Gottstein said significant steps taken by customers to reduce borrowing in recent quarters could now impact those plans.

“We’ve had significant deleveraging (over the past few quarters), probably more than expected in November,” Gottstein said.

“In principle, our plan continues to be to grow our portfolio of loans in wealth management and move towards 3 billion. But given what has happened over the last two quarters, it is clearly a slightly different base to which to go.”

BET ON TECHNOLOGY

Credit Suisse has had a turbulent time since two hits – a $5.5 billion loss on the default of US family office Archegos Capital Management and the $10 billion shutdown of its blockchain finance funds. procurement – assaulted the bank in March 2021.

Other court cases, lawsuits and departures have since kept him in the headlines. Read more

On Monday, the Swiss Federal Criminal Court condemned Credit Suisse for failing to prevent money laundering, in the country’s first criminal trial against one of its major banks. Read more

Under Swiss law, a company can be held liable for inadequate organization or for failing to take all reasonable measures to prevent a crime from occurring. The bank plans to appeal the decision.

De Ferrari noted on Tuesday that recent events have clearly had an effect on the bank’s reputation, resulting in a “partial impact” on business momentum.

Wealthy entrepreneurial clients had expressed support for the bank, the executive noted, but enlisting new clients into its list of ultra-wealthy clients had proven more “difficult”.

Credit Suisse warned in June of a likely second-quarter loss, the third straight quarter for which Switzerland’s second-largest bank has issued a profit warning. Read more

The bank said at the time that it aimed to advance cost savings, accelerating measures targeting 1.0 to 1.5 billion Swiss francs in structural cost savings per year by 2024.

He said on Tuesday that he was considering a technological overhaul to generate some 800 million francs in savings in the medium term, including 200 million francs for each of the years 2022 and 2023.

Consolidating its data centers and other simplification measures should add another CHF400 million in additional savings, said new chief technology and operations officer Joanne Hannaford, who joined the bank from Goldman Sachs. (GS.N) in January. .

The bank said it additionally sees opportunities in digitization to expand its business advising wealthy clients.

Rising interest rates should also give a boost to its flagship division, he said, predicting that rising rates could generate more than 800 million Swiss francs in additional net interest income in 2024. compared to 2021.

It confirmed its objective for wealth management to achieve a return on regulatory capital above 18% in 2024.

($1 = 0.9563 Swiss francs)

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Reporting by Brenna Hughes Neghaiwi and Rachel More; Editing by Michael Shields and Jan Harvey

Our standards: The Thomson Reuters Trust Principles.

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